On December 2, State/OIG posted online its Management Assistance Report: Progress Made But Action Still Needed to Address Physical Security Deficiencies Reported in FYs 2012 and 2013 (PDF). Excerpt below:

During FYs 2012 and 2013, the Office of Inspector General (OIG) issued 12 reports that identified deficiencies in the security posture of 10 posts visited. As part of OIG’s audit compliance and follow-up process, OIG assessed the extent to which the Department of State (Department) implemented the 137 recommendations issued in these 12 reports (see Appendix A). Based on the Department’s actions and responses to these recommendations as of September 15, 2015, OIG had closed 122 of the 137 recommendations (or 89 percent). However, 15 of these recommendations had remained open, 6 of which were unresolved with no communication from the post or bureau since the reports were issued (see Appendix B).

State/OIG acknowledges the State Department’s efforts on complying with the security recommendations but would not let go of the remaining nine recommendations that it says have remained open more than two years after they were made:

U) OIG acknowledges the Department’s efforts to address OIG’s physical security recommendations in a timely manner. As of October 30, 2015, the Department has implemented 128 of 137 recommendations (93 percent) made by OIG in these 12 reports, although 9 recommendations remain open. Prompt and timely corrective action by the Department has resulted in several positive outcomes,REDACTED. However, more than 2 years later, nine of these recommendations remain open. While the responsible bureaus and posts agreed to the other nine open recommendations, final action has not occurred. REDACTED
[….]
[T]he Under Secretary did not provide a plan of action to address the implementation of the remaining nine open recommendations. As such, this recommendation will remain open until OIG receives a plan of action from the Under Secretary or obtains sufficient evidence that the nine open recommendations have been fully implemented. In addition, OIG will continue to track the implementation of these open recommendations and report the status in OIG’s Semiannual Report to Congress.

The heavily redacted audit includes Table 1 which contains a list of the responsible Bureaus and posts and the number of open and closed recommendations as of September 15, 2015. State/OIG notes that “uncorrected physical security deficiencies, if exploited, could compromise the safety of post personnel and property.”

State/OIG also includes the response from “M” that says in part, “If OIG agrees with the Department’s planned way forward for these nine recommendations, then additional attention from this office is not needed.” Elsewhere in the State Department’s response, the Under Secretary for Management Patrick Kennedy also tells IG Steve Linick “this exercise is redundant.”

State/OIG made the following response:

With respect to the Under Secretary’s statement that “this exercise is redundant,” the purpose of this Management Assistant Report is to prompt action to close all open recommendations associated with the aforementioned reports. Although OIG considers the open recommendations referenced in this report resolved because the responsible bureaus and posts agreed to implement them, the fact is that more than 2 years has passed and nine recommendations [Redacted] (b) (5), [Redacted] (b) (7)(F) remain open. For this reason, OIG raised these open recommendations with the Under Secretary for Management and recommended a plan of action to complete corrective actions.

And added two more recommendations:

Recommendation 1: (U) OIG recommends that the Under Secretary for Management provide a report to OIG within 60 days of report issuance on the status of corrective actions and the reasons for delays in completing corrective actions on the nine open recommendations listed in Appendix C.

Recommendation 2: (U) OIG recommends that the Under Secretary for Management provide a plan of action to complete corrective actions, including appropriate milestones, to address the remaining nine open recommendations listed in Appendix C.

Last week, the same couple at the center of this contracting fraud was sentenced by U.S. District Judge Liam O’Grady in the Eastern District of Virginia. Kathleen D. McGrade, age 64, and Brian C. Collinsworth, age 47, of Stafford, Va., were sentenced to 24 and 18 months incarceration, respectively. Given that each defendant faced a maximum penalty of 360 months or 30 years imprisonment, the 18-24 months incarceration is a bargain.

In a lengthy speech before she was sentenced, McGrade offered various explanations for her misdeeds and told a federal judge in Alexandria that she was in court only because she had “been told that somehow the procurements that took place were illegal.”[…]

As O’Grady handed down the two-year sentence — far short of the five years and 10 months that federal sentencing guidelines had called for as a minimum — he said McGrade had nearly persuaded him to impose a stiffer penalty.

“That was almost a delusional recitation of what has occurred here,” O’Grady said. “To convince yourself that it’s everybody else’s fault is astonishing, given the facts of this case.”

Former State Department Contract Employee And Husband Sentenced For $53 Million Fraud | December 6, 2013

ALEXANDRIA, Va. – Kathleen D. McGrade, age 64, and Brian C. Collinsworth, age 47, of Stafford, Va., were sentenced today to 24 and 18 months incarceration, respectively, by U.S. District Judge Liam O’Grady in the Eastern District of Virginia for committing major fraud against the government, conspiracy to launder monetary instruments, and engaging in unlawful monetary transactions.

Dana J. Boente, Acting United States Attorney for the Eastern District of Virginia; Steve A. Linick, Inspector General for the Department of State; and Thomas J. Kelly, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Section, Washington, D.C. Field Office, made the announcement following the sentencing hearing.

According to Court records, McGrade and Collinsworth admitted that McGrade was a contract employee for the Department of State and performed the role of a contract specialist for an office that awarded construction contracts for work done at U.S. embassies worldwide. Collinsworth worked at one of the companies that received contracts. In 2006, the defendants married, but did not tell others at the Department of State. The defendants started a company, the Sterling Royale Group, or SRG, with McGrade being the president and Collinsworth the vice-president and project manager.

In late 2007, McGrade caused a State Department contracting officer to sign a contract between the Department of State and SRG, when McGrade failed to disclose her role in SRG, her marriage, or that proper contracting competitive procedures had not been followed. The contract made SRG eligible to receive task orders for work to be done at embassies and McGrade began steering work to the company. She acted as the contract negotiator between the Department of State engineers responsible for getting the jobs done, on the one hand, and Collinsworth, who was acting on behalf of SRG and the subcontractors, on the other. Between 2008 and 2011, McGrade caused Department of State contracting officers to sign 17 task orders awarding work worth almost $53 million. In 2010, the defendants also lied about their marriage to investigators conducting McGrade’s background investigation regarding renewal of her security clearance.

In the summer of 2011 a news article disclosed the defendants’ marriage, and the Department of State terminated her employment. The Department of State, however, had paid SRG about $39 million, and after the defendants had paid their subcontractors, they still had millions of dollars. Among other things, they bought houses, a condominium, a yacht, a Lexus automobile, jewelry, and a Steinway piano with the fraudulently obtained money. The defendants were ordered to forfeit all of those items in the amount of $7,864,795.

This case was investigated by the Department of State, Office of Inspector General, and the Global Illicit Financial Team, a task force led by the Criminal Investigation Section of the Internal Revenue Service. Assistant United States Attorneys Jack Hanly and Mark D. Lytle are prosecuting the case on behalf of the United States.

From a strategic and leadership perspective, I understand that the responsibilities of the position to which I have been nominated are great. Based on the significant issues facing the Department of State, it is clear to me that assuming the leadership role of Inspector General will be challenging and rewarding. I look forward to this task, if confirmed.

If confirmed, I pledge to:

Ensure that the Department of State Office of Inspector General (OIG) is an independent and objective organization that provides timely, robust, fact-based oversight, transparency, and accountability to the programs and operations of the Department of State;

Efficiently and effectively deploy OIG resources to those areas that present the highest risk to the Department of State;

Collaborate with other inspectors general who have potentially overlapping interests, jurisdiction, and programs;

Ensure whistleblowers have a safe forum to voice grievances and are protected from retaliation; and

Aggressively protect taxpayer funds against fraud, waste, and abuse.

On September 17, after a wait of almost three months, the Senate finally confirmed Mr. Linick. So for the first time in 2,066 days, the State Department has a Senate-confirmed watchdog.

Today, September 30, will reportedly be Mr. Linick’s first day at work as Inspector General of the oldest executive department in the union.

While we have not been following his work as IG for the Federal Housing Finance Agency (FHFA), we understand that he was not shy in questioning publicly the large compensation packages for executives of Fannie Mae and Freddie Mac. He also told them off the bat that he would be no ordinary Washington regulator. We are pleased with this appointment as State/OIG primarily because of that and because he is from outside The Building with limited Foreign Service connections. With him as new watchdog in Foggy Bottom, we hope to see some changes in the way the OIG conducts its business. We think our wishlist below is pretty reasonable.

1. Redactions

One of our pet peeves, especially in the last several years is the redaction of OIG inspectors names from publicly available reports posted online. The controversial OIG report on the IIP Bureau (Inspection of the Bureau of International Information Programs (ISP-I-13-28), similarly was stripped of names on who conducted the inspection. The copy we were furnished did include the names of the team leader and deputy team leader but the rest of the names of the inspection team members were redacted.

When we inquired from State/OIG about this, we were told:

“It is marked as FOIA Exemption (b)(6) – “exempts from disclosure records or information which if disclosed would constitute a clearly unwarranted invasion of personal privacy.”

Now, that there alone gave us a terrible headache. The OIG inspectors are conducting official business in the name of the American public. Why would it be an invasion of privacy if their names are revealed?

So we asked “Why”? And this is what we were told by State/OIG:

“There is recent case law that specifically protects inspectors and investigators from having their information disseminated. However, there is concomitant protection for auditors – so, we continue to release their names.”

Protects them from having their “information disseminated” — as if we were asking for their home address. We just want the names public. So we tried again asking State/OIG for the case law and date that their official FOIA lawyer is citing.

State/OIG who is actually quite good with response time sent us a disappointing reply:

“I’m afraid I don’t have it – and today was her last day.”

Look, there is a a reason why the inspectors’ names should not/not be redacted. Retired and active FS officers are part of the OIG staff. Active FS officers who become IG staff eventually has to bid for other rotational Foreign Service jobs. Since 1978, the Government Accountability has questioned the use of FSOs detailed to the OIG office since they bid and return to regular FS assignments.

In 1978, GAO reviewed the IG’s inspection reports and questioned the independence of Foreign Service officers who were temporarily detailed to the IG’s office and recommended the elimination of this requirement.

In 1979, the GAO noted that Foreign Service officers detailed as inspectors for temporary tours of two years and then reassigned to activities which they may recently have evaluated has negative as well as positive aspects.

In 1982 GAO continued to question the use of Foreign Service officers and other persons from operational units within the department to staff the IG office. It told Congress that it believes the IG’s extensive use of temporary or rotational staff affects the IG office’s independence because (1) these staff members routinely rotate between the IG office and management positions within the organizations they review, and (2) major decisions affecting their careers are determined by the State Department rather than by the IG office.

In 1991, GAO examined whether the Department of State’s Office of Inspector General (OIG): (1) omitted references to itself in an annual oversight report to Congress in a deliberate attempt to conceal internal problems; and (2) inappropriately hired and paid experts and consultants.

In 2007 GAO reported to Congress that it continue to identify concerns regarding the independence of the State IG that are similar to concerns they reported almost three decades ago. GAO concerns include (1) the appointment of line management officials to head the State IG in an acting capacity for extended periods, and (2) the use of ambassador-level Foreign Service staff to lead inspections of the department’s bureaus and posts even though they may have conflicts of interest resulting from their roles in the Foreign Service.

In 2011, the GAO noted some improvements, specifically noting that while State/OIG continues to assign Foreign Service officers at the ambassador level as team leaders for inspections, four of the six officers are rehired annuitants unlikely to rotate to State Department Foreign Service positions. GAO remains concerned, however, about the OIG’s use of Foreign Service officers and the State Department’s need to rely on acting IGs for extended periods of time.

In 1986, Congress made the State IG a presidentially appointed inspector general subject to the Inspector General Act and prohibited a career member of the Foreign Service from being appointed as the State IG. That change did not prohibit the appointment of a career member of the FS as acting IG or deputy IG. According to the GAO in 2011, State/OIG implemented a change to the succession planning for acting IG positions to exclude Foreign Service officers.

We have yet to see that in action.

While we have not been able to confirm the relevant case law that State/OIG cited in withholding the identities of inspectors, we were told that this “doesn’t sound implausible.” Steven Aftergood (@saftergood on Twitter) who runs Secrecy News for the Federation of American Scientists posits that even if such an exemption from disclosure exists (which it probably does), then it would be discretionary, not mandatory. It means that State/OIG would be “at liberty to disclose it even if there was no compelling legal obligation to do so.”

Given the nature of the assignments/rotations in the Foreign Service, and the persistent questions of potential impairments to independence, we look on Mr. Linick to lean on the side of disclosure. Mr. Aftergood suggests that “such disclosure would be a good practice to adopt, particularly in light of the variability of State OIG career tracks and the potential for subsequent conflicts of interest.”

2. Recusals

The GAO report dated April 2011 indicates that to address independence impairments the State/OIG relies on “a recusal policy where Foreign Service officers must self-report whether they have worked in a post or embassy that is subject to an inspection and therefore presents a possible impairment.” The GAO insist that they “continue to believe that the State OIG’s use of management staff who have the possibility of returning to management positions, even if they are rehired annuitants or currently report to civil service employees in the OIG, presents at least an appearance of impaired independence.”

We have never seen any of the published OIG reports indicate whether any recusal was filed related to an inspection or audit. We would like to see that information included in State/OIG reports and audits.

3. A Note on Black Sharpies

Remember the hard-hitting OIG reports on Luxembourg, Kenya, Malta? All made the news. All also have one other thing in common — the chiefs of mission at these three posts were all political appointees. Then there were two other OIG reports on Pakistan and Lebanon that caught our attention, both under career diplomats, and both severely redacted, including one that talks about the leadership shortcomings in the front office. (State Dept OIG Reports: Oh, Redactions, Is Double Standard Thy True Name?). We were told that the redactions in one case had to do with the “geopolitical situation” at one post. Our main concern about this as we have said here in the past is two-fold: 1) the appearance of a double standard and 2) recycling FSOs with problematic leadership and management skills is not going to make another embassy greener or healthier nor make for better FSOs. Without effective intervention, they’re just going to make another post as miserable as the last one and impairs the embassy mission and operation. We would like to see State/OIG apply one standard on its reviews of chiefs of mission performance. Not whether they are effective political appointees or effective career appointees but whether they are effective representatives of the President regardless of their appointment authorities.

On June 10, 2013, the State Department spokesperson Jen Psaki was on the podium answering questions about the CBS report:

QUESTION: First, what – I guess we can begin most broadly simply by asking what comments you have about the report that aired on CBS News this morning concerning State Department OIG Office.

MS. PSAKI: Mm-hmm. Well, the Department of State employs more than 70,000 dedicated men and women serving in some of the most challenging environments working on behalf of the American people at 275 posts around the world. We hold all employees to the highest standards. We take allegations of misconduct seriously and we investigate thoroughly. All cases mentioned in the CBS report were thoroughly investigated or under investigation, and the Department continues to take action.

[…]

QUESTION: — to borrow a phrase. You stated at one point early in your answer just now that all cases mentioned in the CBS News report were thoroughly investigated but that the State Department continues to take action on them. Did I understand you correctly?

MS. PSAKI: Yes. I did not mean to imply they were – the investigations were completed. Some are in process.

QUESTION: And when you talk about those cases being in process or in progress and action continuing to be taken on them, is that separate from the hiring of outside personnel that you also just referenced?

MS. PSAKI: Well, it’s not a hiring. It’s – it would be an investigation being done by the Inspector General’s Office working with outside law enforcement officers. So I would refer you them for any more specifics on that or how that would work. That’s a decision, of course, they make.

The back and forth went on and on to a point of total uselessness. But the official spokesperson of the State Department did confirm that all the cases mentioned in the CBS report were “thoroughly investigated or under investigation.”

The report to Congress ending on March 31, 2013 lists investigations on bribery, theft and embezzlement, false claims, and grant fraud. It includes four investigations under employee misconduct: 1) a DCM repeatedly used his government resources for non-official purposes; 2) a passport specialist used her official position to access personal information of personal acquaintances from official passport databases; 3) a Foreign Service officer responsible for award and oversight of the grants failed to follow grant policy; and 4) a Department employee who was overpaid for workers’ compensation leave (WCL) after a work-related injury.

Any of that remotely resembles the cases described in the October 2012 memo reported on the news?

The report did include under Congressional Mandates and Requests the following item which also made the news at around the same time as the CBS news:

“On November 2, 2012, OIG received a request from Senator Rand Paul to investigate allegations of staff misconduct at the U.S. Consulate General in Naples, Italy. In its response, OIG noted that the complaints were referred to the appropriate offices in the Department and that the complainants were provided contact information for the offices to which the complaints were referred.”

So —

We would like to suggest that among Mr. Linick’s first order of business, and we expect that he will have a full plate, is to personally look into what happened to these eight cases alleged to have been deep-sixed. If these cases had been “thoroughly” investigated as claimed, then there should be records. If the individuals were cleared, there should also be records. If these allegations were never investigated, or there are no records, then one needs to ask why. Of course, there is another “why” that we are interested in. Why would a retired investigator of the Service turn against her old office in the most public way?

How aggressively Mr. Linick tackle these cobwebs and get some answers would help tell us what kind of junkyard dog he is going to be.

Whew! That’s sorta long. We’ll stop here and get some sleep and see what happens, okay?

President Obama nominated Steve A. Linick as State Department Inspector General today filling a 1,989-day vacancy. U.S. Senator Bob Corker, R-Tenn., ranking member of the Foreign Relations Committee, said the nomination today of a full-time Inspector General at the U.S. State Department is long overdue.

“A full time, independent watchdog at the State Department is essential to protect the interest of taxpayers. While this nomination is long overdue, I appreciate the president responding to the concerns that I’ve expressed to him and Secretary Kerry regarding this vacancy, and I look forward to getting to know the nominee as our committee considers his fitness for this important position,” said Corker.

Steve A. Linick has led the Office of Inspector General (OIG) of the Federal Housing Finance Agency (FHFA) since his U.S. Senate confirmation in 2010. As Inspector General, Mr. Linick is the senior official responsible for audits, evaluations, investigations, and other law enforcement efforts to combat fraud, waste, and abuse within or affecting the programs and operations of FHFA. FHFA-OIG’s oversight includes FHFA’s regulation of Fannie Mae, Freddie Mac, and the 12 Federal Home Loan Banks. Mr. Linick heads an independent organization of more than 100 professionals who are dedicated to promoting economy, efficiency, and effectiveness in all FHFA programs.

Mr. Linick has also spearheaded an initiative among Federal inspectors general who play significant roles in supporting U.S. housing. In November 2011, this initiative resulted in the Compendium of Federal Single Family Mortgage Programs and Related Activities, which is a guide to Federal agencies’ major housing efforts. In addition, Mr. Linick is a member of the President’s Financial Fraud Enforcement Taskforce; the Council of the Inspectors General on Integrity and Efficiency (CIGIE), Investigations Committee, where he serves as the Vice-Chair of the committee’s Suspension and Debarment Working Group; and a permanent member of the Council of Inspectors General on Financial Oversight.

Mr. Linick is trained as a lawyer, and prior to his appointment as Inspector General, he served in several leadership positions in the United States Department of Justice (DOJ). From 2006 to 2010, he served in dual roles as Executive Director of DOJ’s National Procurement Fraud Task Force and Deputy Chief of its Fraud Section, Criminal Division. As Deputy Chief, Mr. Linick managed and supervised the investigation and prosecution of white-collar criminal cases involving procurement fraud, public corruption, investment fraud, telemarketing fraud, mortgage fraud, corporate fraud, and money laundering, among other cases. In addition, he was the front-line official at DOJ for contract fraud cases relating to the U.S. wars and reconstruction in Iraq and Afghanistan. In October 2008, Mr. Linick received the Attorney General’s Distinguished Service Award for leading DOJ’s procurement fraud initiative. Previously, Mr. Linick was an Assistant United States Attorney, first in the Central District of California (1994-1999) and subsequently in the Eastern District of Virginia (1999-2006).

Mr. Linick received his BA (1985) and MA (1990) in Philosophy from Georgetown University and his JD (1990) from the Georgetown University Law Center.